Denmark: Financial Sector Assessment Program-Technical Note-Financial Sector Interconnectedness and Contagion Risk Analysis

International Monetary Fund

No 2020/256, IMF Staff Country Reports from International Monetary Fund

Abstract: The FSAP developed a novel multi-layer contagion model to analyze financial system interconnectedness using a new and comprehensive database. This new infrastructure, based on securities data and newly-released confidential credit register data, plays a pivotal role in the development of an advanced contagion model that distinguishes the transmission of shocks between eight different exposure types or layers (loans, deposits, reverse repos, covered bonds, other debt securities, equities, unlisted shares, and other claims). The exercise focuses on the banking system (banks and MCIs), and on interconnections through the covered bond market, as the cornerstones of the overall financial system. However, it also includes exposures vis-a-vis non-bank financial institutions (insurer, pension and investment funds) and non-financial sectors (households, corporates), both domestically and abroad. The simulation exercise consists of a series of idiosyncratic shocks, where the default of each node is triggered iteratively. The model introduces a repricing channel on traded securities to capture cascade effects arising from market reactions to changes in an entity’s solvency condition.

Keywords: ISCR; CR; covered bond market; mortgage credit institutions; reverse repo; covered bond exposure; securities data; modified duration; Covered bonds; Credit; Securities; Commercial banks; Loans (search for similar items in EconPapers)
Pages: 44
Date: 2020-08-12
New Economics Papers: this item is included in nep-rmg
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=49666 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfscr:2020/256

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Staff Country Reports from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().